Voluntary Disclosures

From time to time an issue is uncovered that needs to be corrected and brought to HMRC’s attention. To do so is usually known as a ‘voluntary disclosure’ and is actively encouraged by HMRC. There are a number of routes to disclosure, depending what the issue is.

Sometimes HMRC will send ‘nudge’ letters which prompt a disclosure. Recently it has been doing this where HMRC has information about offshore bank accounts, and has sent letters asking individuals to check that any income arising abroad that should have been in a UK tax return has been dealt with correctly.

In recent months, HMRC’s nudge letter campaign has given particular focus to hundreds of UK customers of Euro Pacific bank. This is HMRC’s latest effort in a series of campaigns to tackle international tax crime and money laundering. If you have been contacted in relation to an account with Euro Pacific Bank, please see here for some further information.

HMRC has also been very active around second properties, checking whether individuals own multiple properties and whether rental income appears to have all been declared. HMRC has a system called ‘Connect’ which is getting better all the time in pulling information together across multiple information sources and then comparing that information to submitted tax returns. Where gaps or anomalies appear, it will either open an enquiry or in some instances send a ‘nudge’ letter.

Depending on the type of issue, there are a number of ways to make a disclosure to HMRC.

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Contractual Disclosure Facility (“CDF” or “COP9”)

Where a serious, deliberate (fraudulent) issue needs to be disclosed, asking for the CDF provides a route to disclosure that also protects against HMRC undertaking a criminal investigation with a view to prosecution. As long as all deliberate issues are fully disclosed, whereas tax, interest and any penalty will need to be paid, HMRC will not pursue the matter on a criminal basis. The protection that this process affords is significant and where deliberate issues come to light, an approach under CDF should be made to HMRC without delay.

Although HMRC issues CDF where it suspects fraud, it can also be asked for as a route to disclosure where issues are significant or serious

Worldwide Disclosure Facility (“WDF”)

The WDF is used for income not received in the UK, but which should have been taxed in the UK. Many individuals are now using this process where nudge letters have been received and further investigation has uncovered errors in the past.

Disclosures of offshore issues can lead to higher penalties in some instances, so a careful analysis of the territory, behaviour that caused the issue and the penalty regime is needed to ensure that the lowest level of penalties appropriate to the case are charged.

Digital Disclosure Service (“DDS”)

The DDS is a catch-all for most issues not covered by the above two disclosure regimes. Most property rental disclosures, for example, are done through the DDS.

With both the WDF and the DDS, once a registration is made that a disclosure will be forthcoming, the disclosure itself needs to be submitted to HMRC within 90 days. Sometimes, for complex cases, HMRC will allow further time on request.

The advantage of a proactive, or voluntary, disclosure is that penalty levels are typically lower for an ‘unprompted’ disclosure than they are for one which is ‘prompted’, i.e. one that is made after HMRC open an enquiry or have been in communication with an individual.

If you need help to assess whether you need to make a disclosure, perhaps after a nudge letter is received, we can help.

If you need to make a disclosure, we undertake all the analysis and communication with HMRC to get you through the process as quickly as possible, allowing you to move on with your life worry-free. If you have any about voluntary disclosure, please get in touch with one of our experts.

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